on twitter at liz wall for now have a great night. i'm . wealthy british style.

markets why not. come to. find out what's really happening to the global economy with mike's cause or for a no holds barred look at the global financial headlines tune in to kaiser report on our.

good afternoon and welcome to capital account i'm more in leicester here in washington d.c. these are your headlines birds thursday december sixth two thousand volts it seems to be at the center of the u.s. as current fiscal blows in the debate over them. when it comes to raising taxes on the wealthy those making more than through the fifty thousand dollars if republicans do not agree to that is the administration prepared to go over the fiscal cliff oh absolutely. absolutely but when it comes to the u.s. is economic problems does this tax debate or even as fiscal cliff debate begin to scratch the surface of the crisis all former republican strategist author and historian kevin phillips is here with lessons we can learn from seventeen seventy five the subject of his latest book that many a politician may benefit from actually reading. from

a long time and paul church i don't do it anymore books boys my thirty do not read his frugal. or go and the as these the is reportedly investigating going to be providing twelve billion dollars in derivatives trading losses in two thousand and eight yeah yeah there's a list of alleged bad bank behavior how is good capitalism though being driven out by bad capitalism oh we'll break it down and word of the day plus alan greenspan says a painless solution to the u.s. debt is a fantasy finally something we can agree on the more loose change let's get to today's capital account. our guest kevin phillips made

a name for himself in the late one nine hundred sixty s. as a g.o.p. operative who coined the phrase and wrote the book the emerging republican majority predicting the rise of the republican party by securing the south for a generation fast forward though and now he's writing about revolution in particular seven hundred seventy five which he says was a good year for it that was of course when the american revolution was going on and when it comes to this war he gets into economic factors that may not have gone down as saliently in mainstream history as taxation without representation but were major goals none the less among them was the inability of colonists to manage their own monetary affairs because of british policies also over indebtedness that was in part the result and the brits control of trade which required certain commodities to actually pass through middlemen all the way over london now to delve into what we can learn from this history as the u.s. faces its modern economic problems earlier i spoke to kevin phillips he's a former white house strategist to president richard nixon he's also author of many

books including his latest seven hundred seventy five a good year for revolution i first asked about the problem of overindebtedness it was an issue in seven hundred seventy five i asked how that would compare to what we see now. overindebtedness at this point. it's like ten different flavors i mean you've got the government has a way to botched then you have private credit whether it's for mortgages and credit cards or just simply private various forms and that's huge they have talked about trying to do to leverage the credit market jet in this country is extraordinary but there hasn't been much more adoption of the total credit market maybe has been reduced by four five six percent now. when they recognized the overrun of the problem by simply letting a depression happen in the 1930's the credit market really trying and of

course that made for a depression right flat out where there's no willingness to do this at this point and what they're trying to do they're not solving the problem of overindebtedness in any meaningful way so what everybody has to wonder are they going to solve it with inflation or are we about to see inflation and parents article are they getting rid of the penny of the nickel and john you're worried and they're going to for it's going to be requiring prices to be priced of the ten cents that's going to create a sense on the part of the public of inflation coming and then that jeopardizes the whole approach to diet that's interesting and some do believe that the fed is trying to inflate its way out of debt that it's the only politically possible way to do so in this country which brings me to the modern debate we hear so much about the fiscal cliff it is what the modern debate over the fiscal the country's fiscal problems and partially economic problems are centered around currently and that has

really been centered around the issue of taxes for the top bracket some other things in there too but really this issue of let's play a clip of some of the key talking points. and we're going to have to see. rates on the top two percent go up and we're not going to be able to get a deal without it our members believe strongly that raising tax rates will her do you come. to polls. especially those who are wealthy is a better way to raise this revenue then raising rates. ok so they don't agree on taxes for the top two percent of the country but bigger picture is this a thin representative of any kind of transform ational issue that will save the u.s. economy or the ten flavors of debt that have accumulated to such a great extent well listening to a little snippets of debate a speech where the pros of the republicans in congress i think the whole thing has

a major element of farce. the democrats really don't want to cut spending very much they know that's a huge part of the problem the republicans don't want to raise taxes on the top rockets they know that's coming but i don't want to would admit they know what's coming but the number of them know it's calming the democrats in the united states almost as much and sometimes even more money from the richest americans of the republicans to both sides refuse to acknowledge that they are basically in hock to interest groups and that they can't begin to confront this crisis head on meaning the economic crisis they're demanding right across the devastation of the deficit crisis. the lock of the ability to really get a serious recovery going as long as not much there are

a lot of studies showing that the higher the debt a lot of those the lush you could really have a growing economy kenneth rogoff and carmen reinhart came out with that salary debt overhang to just that so then what do you think are the lessons from seventeen seventy five you know why. being seen what was going on and fast forward to today what can we learn from from the politics of the time and the bold moves of the dime that can inform the us that is. facing such economic problems well. barack obama. was acquainted with some of the larger dimensions of the problem and how other countries like the british and the dutch previously had gotten in this kind of trap and he was well aware that he decided to take a somewhat happy talk if you won two thousand and nine because the democratic politicians convinced him to get on the right track with democratic economics and will solve the problem so he has backed away from facing this seriously i don't

think that the republicans facing it at all seriously here they are much to march in the hawk of their upper bracket groups and i don't think unfortunately at seventeen seventy five or six has much of a lesson the politicians who can't appreciate what's happened to some of the other countries more recently aren't going to go jumping back and look at what was going on in the seventeen seventy five or seven hundred seventy six i've spent a long time in politics and i don't do it anymore but believe me they do not read history books said they i mean you talked about in seven hundred seventy five you know what you took away from it was how much was needed in terms of really difficult politics and and hard talk and raising tough issues and that that was really needed to make progress but i don't see that today do we know i don't think

there are even confronting the framework involved now in fairness back and seventeen seventy five and seventy and seventy six the colonies world blige to confront the problem this time of the tried to run a wire but in general i come from of the problem. what they're doing now is not confronting the problem and i don't believe that any history or any lessons from history are going to jar of them and in fairness one the british were facing similar problems they didn't confront this they knew about prosser this from holland and they didn't confront it the dutch couldn't confront it before conferees can't tackle these things because they go to the heart of a build up of events for screwups and failures over a century or at least two or three generations politicians can't cope with that sort of thing so do you think it would take another not a war like we saw in the american revolution perhaps but i know other economic

crisis or financial crisis to force more acts and would it be acting do you think based on your knowledge of politics in the right direction or further down the wrong road where you were asked you know exactly the right set of questions here the crisis is probably necessary can we assume a crisis will focus the right time for a movie in the right time with concern i'm skeptical i think it would what it would bring would be a member round of floundering the some partial responses but one of the lessons of history which leads me to think that nobody will solve the problem is that the previous nations facing comparable problems could never really cope with that and i do think that unfortunately the best guess as to was solution here is to work in flight and deal with it that way history suggests that doesn't usually work are there for other reasons interesting when you're talking about those countries in similar situations what would you be comparing it to like the british empire as

well there are people to deal with and all this is a matter of history and economic history generally suggests the immediate predecessor was britain the previous predecessor in the seventeenth and early eighteenth century where the dog won. like when new york was annoyance to them. kevin phillips after the break on deregulation some more of the modern financial issues but if you really want to delve into the history of seven hundred seventy five and the currency and trade issues at play then check our you tube channel for a web exclusive because we did probe more into that also still ahead alan greenspan talked to bloomberg today about the fiscal cliff what else but hey on long term deficits maybe we agree with them find out what he said in loose change but first the closing market numbers.

welcome back we are speaking with kevin phillips are we i spoke to him earlier and now though he was a republican political strategist he now is very critical of both parties and one reason progressives have been a big fan is because he's been hugely critical of financial deregulation over the years i had to ask him about it take a listen. let's go through first some of the history of deregulation and money let's play a couple of clips. are you have

a record good secretary of the treasury to be very good to the dollar are going to cure it. i have directed secretary connally to suspend temporarily the compatibility of a dollar into or otherwise asset true problems of our nation a much deeper. deeper than gasoline lines or energy shortages deeper even than inflation or recession i need your help. so you have nixon taking us off bretton woods once and for all carter marking a period of horrible stagflation that paved the way for a massive deregulatory measure in the form of the monetary control act and then here you have bill clinton after he had signed the repeal of glass steagall with his cronies paving the way to too big to fail and then here is george w. bush after he had signed the bill named bankruptcy abuse prevention and consumer protection act of two thousand and five which i would say ils ill named because it

actually made declaring bankruptcy more difficult so we've heard you talk about deregulation i want to get to that but first i don't think i've heard you talk about how you feel about the end of bretton woods and the move finally away from commodity based money into a debt based currency system which is allowed for really this unprecedented accumulation of credit and ten flavors of debt well somebody could do a very effective book on the united states and go over the various stages but i don't see the movement toward from the wards quite the significance that others do because it wasn't that it was a war. change. there's some surely what you have what nixon closed the gold one of the fraser seventy one the united states was not really still on gold standard until the point that it was just modifying the end of the gold standard to be a complete end of the gold strike and he had started the printing process dollar.

but other countries have had printing for us currency and otherwise. i think i agree that the downhill slope started in a major way during the sixty's and seventy's but the war in vietnam was responsible for a lot of the economic dislocation and the extent to which inflation was coming on the dollar weakening and that was on the front thing that was a mistake in foreign policy i want to. you know when you look at countries when they get in this kind of pickle it's generally been a failure of more than financial policy it's been the failure across a broad range just for example look at pictures of the pros or the stealing most not only warm presidential aspirant i didn't support him but he did do this in charge and everything ross perot you know remember a whole world and we put up these people have never gone to the heart of any of the

crises they've been describing they've never explained how they've started they've never shown what was involved oh we've got a major producers here and i want to take a firm stand you know and then we get a policy in the ten years later somebody else wants to take a firm stand without explaining what it is that's happening that's what happened what would you say is the core problem that has been happening that's led to this well i would say of a core problem at this point is the united states is a declining world power that is not able to deal with the sources over its decline which our economic economic. poor foreign policy expects to play a policeman for the world without anybody wanting us to and without being able to afford it. we're trying to support the dollar as the world's leading currency and. i doubt that that's possible anymore oddly enough the dollar is better supported by crisis than by he i mean i think it's ironic. because this is

a haven so then in terms of just deregulation to end on why do you think it is that republicans and democrats have embraced that so wholeheartedly as the. of the best bang for the economy you know not withstanding the more recent times where we have seen some back to try and bring back those regulations even though it's not been totally successful. well i think the notion of deregulation as a solution. of the purchase to a certain extent when they were beginning they were real rise into the sunshine during the victorian years in the middle of the nineteenth century didn't move away from what had been a marcum to list pattern even as late as the early nineteenth century and they cut taxes and they did deregulate but that was in a period in time when a laissez faire was spreading around the world and was a movement to get rid of old structures from another era i don't think the

deregulation has anything like a framework of historical justification at this point. it sort of came out of reagan and thatcher and is now being prolonging it in a way that i think what you're seeing in asia for example is is the rise of state capitalism and i don't think it's the regulators are still regulation compared with communism and some of the old mistakes right but this notion that deregulation that's an anglo-saxon policy and even the british don't push it so much anymore. i don't think the deregulation is the word that's being used broadly but in terms of rolling back tax is giving business a chance to to solve the problems this is all republican rhetoric i mean i've seen this sort of stuff for fifty years now and this isn't the first time and it won't be the last time once a generation it's deliberate the economy cut taxes. and that is thank you i think

misguided i think it's stale i don't think this is a solution and i don't think the democrats where their solution about spending more money. coming back to all these programs that they always want all these programs and the republicans always want to liberal. version of mars award. as far as what does work i asked mr philips and he said i don't know if there is anything at this point so. sorry not a more positive note to end on but lots of nuggets there of good thought from kevin phillips former republican strategist author of seven hundred seventy five.

you know what time it is time for word of the day when we break down a term or concept for our smart viewer but maybe not the financial expert i have a penny here from one nine hundred seventy one you'll find out why i'm keeping this baby i'm not going to spend it in a moment because given our conversation about money and coinage with kevin phillips who touched on it the word of the day is gresham's law so what exactly is it according to a vested pedia it is the following a monetary principles stating that bad money drives out good money but it's a bit more complicated that bad versus good because what does that even mean so let's take a look at what it means if a new coin is issued and a legal authority such as a government artificially overvalues this new money says this is good for x. amount and undervalues another then as more and more of this new currency enters the system people actually take their old undervalued coins and pull them out of circulation. so my nine hundred seventy one penny on what i want to keep in here is why one recent example is when the composition of the penny changed in one thousand

nine hundred two so the pay was five percent copper and five percent zinc so here is the composition back in one thousand nine hundred two then it was changed though they flipped it around two point five percent copper and ninety seven point five percent zinc and now the value of the older pennies my nine hundred seventy one penny counts is well over two cents which is why we see things like this. works in pennies by the time. money clients storing huge shocks of money and inquiries from. now i do want to tell you i'm sorry to disappoint you but in two thousand and six the u.s. mint did pass a rule that banned melting coins due to rising metal prices and it's illegal to transport more than five hundred pennies out of the country as well try getting those thirty s a anyway but in two thousand and seven the mint issued a press release stating why there is concern they said that speculators could remove pennies and nickels from circulation and sell them as scrap for profit so

there you have it in action but here is an older example of gresham's law in the seventy's an eighteenth century great britain was on a silver standard but when the master of the man sir isaac newton there is a fine looking fellow he established a new meant ratio of silver to gold which overvalued gold and undervalued silver and you can imagine what happened as i explained what happens of this law this over began to disappear and gold flowed into the country now gresham's law can be applied not just to money but to more than that to perhaps politics and forms of capitalism as well where the cream never rises to the top in fact it goes towards the lowest common denominator but that's gresham's law it's our word of the day.

ok let's wrap up with loose change dimitri let's talk about central bankers it's your favorite topic out of all they're my favorite people there so alan greenspan very famous former one spoke out on whether a painless solution can be found to avoiding the fiscal cliff ever to sing us long term deficits take a listen. the presumption i'm going to have a plane with. me. so he said it's fantasy that there is going to need to be economic pain in reducing long term deficit i agree with him on that i'm glad he's if you're going to be on the hook and i'm glad he's out saying things like this whether to become mr real is when you become mr whalen you left office yet he was no one of them going on most wanted official. you know alan greenspan has gotten off the hook like

there's one person that's walked away you know when the financial crisis happened like he got a little bit of flack but that's it you know he hasn't got and still of there are a lot of people out there that you know you could have you didn't know what industry should be or whether they were too hard too low i'm just i think there's one guy that's gotten away with more like bush did a lot with a lot i know i think that this i think i mean i think it's unfortunate that the fiscal cliff has become such a din of coverage because i think major points are lost and it's interesting one that i want to highlight that is worth noting so steve kean our guest our frequent guest was actually on the hill yesterday for a congressional briefing with members of congress who brought him in to do that and he was talking about how based on historical precedent what you could see with the fiscal cliff in terms of cuts dimitry to the public sector are it's not so much the impact of those public sector cuts but the impact on the private sector that may

begin to leveraging once the government starts cutting what a shock yeah this is shocking news if you guys don't know this one of no you're not watching the show i mean. yes this is true this is actually one hundred percent accurate ok there is it back private liability yes yes but what i think is interesting is because it's a republican talking point that businesses are holding off on spending because of uncertainty because of what's going to happen with spending but yet steve can i think many would amount to. i would characterize a lot of ideas as more of a lefty economist so there you have. they're saying the same thing in the middle not meeting in the middle saying the exact same thing but i don't mischaracterize anybody here so let's move on because we just have a minute and i'm not going to play a clip i just want to address that deutsche bank is being probed by the f.c.c. for hiding billion dollars in derivatives lost in a way they say this is old news one of the interesting points the wall street journal made is that they were a bank that did not take state aid during the crisis where i said doesn't this show

that the ability of banks to muddle through despite these losses you said that's not true and that's why it was bogus because i do remember i haven't had a chance to check those but they were top may be second or third on the list total for. also if all your counterpart is are illiquid or insolvent or a majority are and then they're getting bailed out also then that's also a bailout for you so if you're part of a interconnected system where which is generally over leveraged even if you yourself are a good player you're still in big trouble but but also there's a very good bill and. a bailout ok it was in the it was the it was the idea that the government was going to solve the problem but i have to stop because we're out of time but i don't i can't offer you a penny for your thoughts i'm going to do me any good now for some time and i've also found out not only having time for thank you for watching be sure to come back tomorrow in the meantime you can follow me on twitter at lauren lyster watch us on you tube or hulu check in on our you tube because as i said you can watch the full seven hundred seventy five view on their web exclusive and have

a great night. wealthy british style. sometimes. markets. can't. find out what's really happening to the global economy with max conjure for a no holds barred look at the global financial headlines tune into cars a report on. the mission and free accreditation free transport charges free arrangement three discreet studio time free.